All Forum Posts by: Hugh Carnaha

@Hugh Carnaha At that price per share ($325,000), even the people that can buy the stock can only buy 1 share. Even if I wanted to I could not buy a share. But I would assume the price is the main reason someone would only buy 1 share instead of a higher amount of shares which is typical for every other stock.

@Hugh Carnaha The good news for you is that there are some great commercial products available right now with rates closer to Fannie/Freddie than ever.  

But yes, just like @Chris Mason said, it's 10 financed properties not 10 mortgages.  I have a guy who came to me for an A Paper loan this week insisting that he's still eligible despite Tax Returns and a SREO that show 50 + 1-4 unit properties bundled in commercial loans with local credit unions hahah.  Lucky for him, his deal made great sense in a commercial product that had no limit on the number of financed properties he had. 

While it's true that these loans don't report to the credit bureaus in most cases they'll still come up on your tax returns or a lender's internal search so it's not a viable way to circumvent the rules against # of financed properties.  

Howdy @Hugh Carnaha!  The answer to your question here is going to be based on what the 4% rule is more formally known as: "The Safe Withdrawal Rate" or other similar names including the word "safe."  Within the FI and FIRE communities there is a lack of consensus around 4% specifically and you'll find the more conservative members favoring a lower rule, like 3.6% or 3.8%.

The reason this is considered a "safe" rate to draw down on your investments is that the overall market returns OVER TIME are well above 4%, so if you build your assumptions on numbers that have historically been achievable, then you'll have the highest likelihood of achieving similar results.   During a recession, correction, or coronation (can we call it that?)  the value of investments will shrink but the ideology is based on what happens over the grand scale.  So, short term losses are washed out by years like 2018 and 2019, which "ran" for well above 16%.

There is an element of "luck" here, like any of the FI pandits will acknowledge.  If you are 30 years old, hit your FI number, and handed in your 2-weeks notice to your employer to start out 2020 then your portfolio will have a more significant drawdown affect as a result of having a "down market' in the initial withdrawal period.

For a more robust discussion on this I would recommend  digging into the Sequence of Returns Risk discussions with JL Collins (the FI guy, not the Built To Last guy) and Big ERN from Early Retirement Now